Develop renewable energy in China: a lesson from West

Hervé Machenaud / Vice President Asia-Pacific, Electricité de France (EDF), Former Group Senior Executive Vice President of Generation, EDF / 2014-11-24

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Hervé Machenaud, EDF Group Executive Vice President, Asia Pacific Branch President

China’s efforts to break from the shackles of coal to build a low-carbon electricity market are to be commended. Few countries have taken such vigorous measures in favour of sustainable development. Their structural direction has already enabled remarkable progress in lowering the energy intensity of economic growth. Even more ambitiously, the government is targeting a 40% reduction in the carbon intensity of GDP by 2020, based on 2005 levels. In order to meet this objective, the energy sector must contribute substantively. The road map is clear: only ‘clean’ coal and less of it, more gas and also much more nuclear and renewable energy.

 In Europe, we speak of ‘energy transition’, in China it’s all about development towards an ‘ecological civilisation’. This path should lead to a balanced energy mix that ensures a country’s independence, uses resources economically, is low-carbon, while remains adapted to the buying power of its population. The goal of 15% non-fossil fuels in final energy consumption has been fixed for 2020 (against about 10% today). To reach this, China logically expects to draw upon its strength in hydropower, its rapidly expanding nuclear industry and also on renewable energy sources.

In this sector, as in many others, China is racking up the records. Its wind and solar capacities are already the world’s largest and continue to grow at a sustained rate. Indeed, there is a complete industrial sector here in China, which is a major source of both jobs and exports. In order to realise the goals of sustainable development and maintain this industry, backing intermittent energy sources is thus a natural choice.

But while they undertake such fundamental energy choices, Chinese leaders would do well to examine what has happened in Europe. Right across the Old Continent, public support for renewables is now waning. It must be recognised that the “green bubble”, fed by a flood of subsidies, has burst and with it the dream of clean, free and unlimited renewable energy. Europe is now waking up to the hangover: the miracle of green energy has not materialised. 

Europe Awakens to the Harsh Reality

The disillusionment has been abrupt, especially for Germany, which had adopted the most radical approach, aiming to produce 27% of its electricity from renewables this year. But the economic outlook is painful and the ecological result paradoxical. German households, for whom the price of electricity has ballooned, have become the main victims of unconditional support for solar and wind. The heavy burden of subsidies runs to the astronomical sum of 20 billion euros a year, even larger than that allocated for renewables in China (6.6 billion euros this year) for what is not nearly as large a fleet. Sensitive to public discontent, German politicians voted in June of this year in favour of a drastic reduction in subsidies. In the past few years, the lowering of feed-in tariffs for green electricity has already laid bare the fragility of this industrial sector. In solar, companies who were previously attracted by the state’s financial windfall are now defaulting. Even the industrial giants Siemens and Bosch ceased their solar energy businesses in 2012 and 2013. The venture cost each of them more than a billion euros and, for the country, several thousand jobs.

Alongside this economic failure, the environmental outlook is no more heartening. It’s true that wind and photovoltaic have broken records in Germany. Wind and solar supplied as much as 75% of the country’s electricity at lunchtime on Sunday May 11th 2014. This was without precedent. But such a performance was as spectacular as it was insignificant because intermittent energy sources have proven to be inadequate to meet true peaks in consumption. In Europe, such periods come about each winter, at the end of the day when the heating, electrical and household appliances are all in service. And yet at such a time, the sun has already set and there’s no certainty of wind. During these moments, Germany now has to start up emergency coal-fired power plants to meet the demand. The result: the country’s CO2 emissions rose last year. This is the paradox of Germany’s ‘green’ revolution: it also uses coal. At the same time as the country has made a stand behind wind farms, their fossil-fired power plants have also been kicked back into service and consumption of lignite, the most polluting form of coal, has risen. This is the harsh law of electricity: megawatts can’t be stored and must be consumed once generated.

This principle, as old as Edison himself, has consequences for the whole of the electricity sector in Europe. German electrons injected into the high-voltage grid by wind turbines and solar panels oust other sources of generation. Their arrival, like their retreat, is a brutal and unpredictable phenomenon that can threaten the balanced load on the grid. Moreover, such subsidised electrons, generated by wind or solar, defy the competitiveness of fossil-fired and nuclear power plants. With such power being unleashed across the European grid, at any unforeseen moment the price of electricity could drop to zero, if demand was weak. This situation becomes absurd when these prices become negative: buyers end up paying to consume electricity that would cost more not to generate! Another consequence is that fossil-fired plants are becoming loss-making but remain more necessary than ever. Europe has resigned itself to paying-out to these power plants during their periods of inactivity. The ‘green revolution’, thus requires subsidising both renewables and fossil-fired CO2 emitters at the same time.

Ambitions must stand on solid ground

The German experience (Read more about Germany’s energy transition) is a lesson for everyone. It reminds us of the fundamental principles of the energy sector. Firstly, developing a new energy mix should not involve getting rid of all that already exists, nor should a new means of generation be implemented on a massive scale. Furthermore, electricity grids are interconnected, especially in Europe: any changes should be made in consultation. The energy transition must be progressive and planned for the long term.

New energy sources require supportive measures to be in place, in particular to level out their intermittence and overcome the technical challenges they present. Chinese ambition in renewable energy must be along such lines to exploit best its wind and solar potential. To take wind power as an example, it already accounts for 3% of the country’s electrical generation. The potential to develop the fleet has been estimated at 1000 GW, almost equivalent to China’s total generation capacity at the end of 2013. Chinese wind power capacity has already surpassed the symbolic threshold of 100 GW and is steadily rising and achieved an average of about 2000 operating hours per year.  

Nevertheless, in order to harness Chinese wind power fully, geographical challenges must be overcome. Indeed, the areas most suited to wind power generation are located in the windswept plains and desert plateaus to the West of the country, more than 3000km from urban centres, the major consumers of electricity. The development of the fleet therefore requires the construction of a vast network of transmission lines to connect wind farms with consumers. Currently, such relative isolation has resulted in a significant proportion of turbines (25%-20%) not being connected to the grid, due to the lack of long distance infrastructure and local consumption.

Another area of concern is the pace of generation and, consequently, its ability to meet peak demand. A detailed analysis of wind patterns is necessary to ensure that generation phases correspond to hours of heavy consumption, ideally peak times.

Storage plays a determinant role in optimising intermittent generation. In advance of a step-change in battery technology, pumping stations offer interesting synergies with intermittent energy sources. Hydropower plants operate with two basins of water at different levels. If wind turbines or solar panels generate when electricity demand is weak, the energy can be used to pump water to the upstream basin. At peak time, this water then passes back through the turbine to generate electricity. Such an approach could enable greater use of intermittent energy sources in areas rich in hydropower resources, such as South China.

Electrical generation from renewable energy sources is clearly more variable and prone to fluctuation. It therefore requires very precise grid management, something which has become a smart and sophisticated tool in itself, to manage the different modes of generation and bring them in line with usage and its variation. They ensure the correct integration of intermittent energy sources, in respect of the coherence and balance of the electrical system.  

In parallel, China has adopted economic measures which support and stimulate such energy transition. In this area, the expected inclusion of a cap on subsidies granted to renewable energy sources in the next Five Year Plan (2016-2020) is a good sign, as it would enable, one hopes, the industrial sector to plan and adapt accordingly. Similarly, measures that place a price on carbon dioxide should help to shake up enterprise. The emergence of the first pilot Emissions Trading Scheme (ETS) in China in 2013 is also a move in the right direction. 

Alongside such mechanisms, it is also necessary to change the electricity consumption patterns towards more flexibility and reasonable use, first and foremost, energy saving. Moves to meet the Chinese government’s targets in energy intensity reduction are well underway. In the electricity sector itself, there is still progress to be made in how to create the same wealth using less electricity. There is therefore significant growth potential for companies in the field of energy services in China.  

Clearly we are faced with industrial structures, ways of life and societal choices that go far beyond simple technical considerations, and which require conciliation and education. The first stage in such a debate must be an objective discourse on intermittent energy sources to avoid unrealistic ideas about their potential.

Successfully introducing such new energy sources is a long, drawn-out, steadily coordinated process, anything but a sudden revolution. The growing strength of renewable energy is necessary, but one must not lose sight of the bigger goal of a transition towards a low-carbon society, with sensible energy consumption.